We are not the beautiful

Tuesday, 14 November 2017

“Tax havens on some tropical island” the writer Thomas
Frank said last week, “aren’t some sideshow to western capitalism; they are
a central reality. Those hidden billions are like an unseen planet whose
gravity is pulling our politics and our economy always in a certain direction.”

Looked at this way, tax havens are a permanent and
unalterable reminder of the impotence of governments in the face of footloose multinational
corporations and the 0.001 per cent. But, in reality, their very success may be
the ultimate undoing of the corporate system. They may make the creation of an
alternative economy unavoidable.

To captive governments, tax havens exhibit a ghastly allure
– if you aren’t in on the act, somebody else will be. To corporations in the US,
a country with the highest corporate tax rate in the developed world, Britain
is a tax haven. Hence, the problem of ‘inversion’ –
corporations deliberately re-locating where they are legally registered to take
advantage of the lower rate (currently 19% in the UK but soon to be lower). To
corporations in Britain, Ireland, with its 12.5% corporate tax rate, is a tax
haven. To corporations registered in Ireland, the Netherlands is a tax haven
because it allows profits to be transferred at negligible cost to zero tax Bermuda,
whereas Ireland imposes a high tax on such transfers.

The sobering reality is that Ireland used to have a
corporate tax rate of 50% buy it makes more revenue from the current rate of
12.5% than it did when the rate was four
times higher. This isn’t because the low rate is attracting actual business
investment – investment is at historically
low levels – but because it is stealing the tax revenue of other countries.
Many corporations are legally domiciled in Dublin and pay tax there but don’t
carry out any investments in Ireland.

Thus there is a competitive advantage to lowering your
corporate tax rate, even while the system as a whole is gradually strangling
government revenue and enshrining austerity as a permanent feature of political
life. It is estimated that EU loses €350
billion to multinational tax dodging every year, while in Britain the
figure is €12.7
billion; a little less than the £12 billion of social security cuts that the
May government inherited from George Osborne and is still implementing.

With Donald Trump about to reduce the headline US corporate
tax rate from 35% to 20% the race to the bottom will likely further intensify.

Rather than going through the motions of cracking down on
tax avoidance, governments could get serious. They could close down the tax
havens that are within their jurisdiction or the shell corporations that enable
profits to be funnelled tax-free out of the country. They could insist that
corporate tax equivalence is an integral part of any free trade deal – an
agreed international band of 30-33% for example. At present, the Eurozone, as
part of its Stability & Growth pact, mandates that government deficits
don’t exceed 3% of GDP, whereas it leaves corporate tax rates entirely at the
discretion of national governments. It’s no surprise, therefore, that six EU
countries – Luxembourg, Ireland, the Netherlands, Belgium, Malta and Cyprus –
are classed as tax havens.

But even if this happens, and that’s a mighty big ‘if’, it
probably won’t be sufficient. There will always be loopholes that teams of
lawyers can exploit and doubtless some ‘rogue states’ that will offer zero per
cent corporate taxation. Therefore, in the fullness of time, governments may
well be forced to consider the ultimate legal sanction – the withdrawal of
corporate status. The Achilles heel (and dirty secret) of seemingly invincible
multinational corporations is that they are entirely dependent – legally dependent – on the state. As
Joel Bakan writes in The Corporation, “The state is the
only institution in the world that can bring a corporation to life. It alone
grants corporations their essential rights, such as legal personhood and
limited liability, and it compels them to always put profits first … without
the state, the corporation is nothing. Literally nothing.”

It has been mooted that the threat of the withdrawal of
banking licenses should be invoked in order to deter major banks from
facilitating tax dodging. For major corporations who routinely engage in
massive tax avoidance (just look at the names
that crop up in the Paradise Papers) the threat of the withdrawal of
limited liability or corporate status in its entirety is probably the only
thing that would make them think twice.

It will be immediately objected – and with good reason –
that for the really big corporations – Facebook, Apple, Google – this is simply
inconceivable. They are too powerful, and just as importantly so integral to
people’s daily lives, that they are untouchable. Withdrawing Facebook’s
corporate status is probably the psychic equivalent of banning coffee.

Given the terrible bind that corporate tax avoidance places
governments – and by extension the public – in there is only one alternative.
Publicly owned, cooperatively-run companies need to be created to, in time,
compete with the behemoths. Companies that will, openly and willingly, pay
their taxes and whose very existence gives credibility to the threat of withdrawing
corporate status or limited liability from those that don’t.

The technologically know-how certainly exists in the public
sector – many of the breakthroughs that the tech giants rely on were hatched in
the public sector and gifted to them at no charge. There are already pioneers.
The New Economics Foundation is piloting a ‘mutually-owned, publicly regulated’
alternative
to Uber. At the last GE, the Labour party committed itself to the ‘right to
own’; giving employees the right of first refusal if the company they work for
is put up for sale. Community Interest Companies – for profit companies with an
asset lock that commits them to working in the public interest – are growing
following their creation more than a decade ago.

All this indicates that it is not utopian to think that, in
time, a publicly owned ‘shadow economy’ could be a viable alternative to the
corporations that dominate the intimate details of our lives. Given the
implications of tax havens, they may be the only hope for a liveable world.

Thursday, 19 October 2017

We are marginally less constipated than before.
Ideologically speaking. Thanks in large part to Jeremy Corbyn British politics
has begun to move on from the mendacious obsession with public debt being the
cause of the last financial crisis (and the harbinger of future ones).

Political conservation has started to appreciate the
seriousness of enormous levels of private
debt, which was always the elephant
in the room. The Bank of England has warned of a ‘spiral of complacency’
about growing household debt, while the IMF has cautioned that the ‘rapid
growth in household debt – especially mortgages – can be dangerous’.
Anthropologist David Graeber says ‘the
household sector is a rolling catastrophe’. Around 17 million Britons have
less than £100 in savings. And with the
BoE making noises about raising interest rates from rock bottom levels, there
are worries that some mortgage-holders could default, precipitating
a US-style sub-prime crisis.

The problem is that all attention is directed at one kind of
private debt – personal debt. And while its seriousness should not be minimised
there are other sorts of private debt that merit just as much, if not more,
concern:

Personal debt is not
the most extreme form of private debt

Private debt can be divided into three types – financial
sector debt (i.e. banks & insurance companies), corporate debt and personal
or household debt. All three have grown exponentially since the start of the
1990s. According to economist Michael Roberts, what he terms ‘global
liquidity’, a combination of banks loans, securitized debt and derivatives,
mushroomed from 150% of world GDP in 1990 to 350% in 2011. And while in some
countries, colossal financial sector debt has declined to a degree following
the financial crisis, and household debt levels fell before rising once more,
corporate debt, nourished by near zero interest rates, has just snowballed over
the last nine years.

According to figures released by management consultants
McKinsey in 2015, all forms of private debt have grown since 2007 but corporate
debt has increased by double the rate of
both household and financial debt, which nonetheless rose but in a more subdued
manner than before the crisis (see
the graphic in this article). Government debt has also exploded as
financial debt was transferred to state coffers. “Nonfinancial corporate debt
remains the largest component of overall in the advanced capitalist economies
at 113% of GDP,” says Roberts, “compared to 104% for government debt and 90%
for household debt.”

The forms that corporate debt takes vary but one of the most
common is for companies to use debt to buy back their own shares. This
practice, which was illegal in the United States before 1982, increases the
firm’s share price in a totally artificial manner, giving the appearance of
financial health and success in the marketplace. Frequently, it also personally
benefits the corporate executives who authorise it as they are paid partly in
stock options. In fact the corporate sector has been the main buyer of US
equities since the market meltdown of 2008, engaging in what has been described
as ‘the
greatest debt-funded buyback spree in history’. It was estimated that in
2017 the largest US companies would spend
a record $780 billion on share buy backs, though, in reality, the forecast
bonanza has apparently hit
a snag.

Or possibly corporate debt takes the form of shareholder
loans, the practice by which one company deliberately loads another company
that they own (they are the main shareholders) with huge amounts of debt which
the captive company is then obliged to pay back at high rates of interest; 15
or 20% for example. The
Financial Times recently highlighted the case of Arqiva which owns 9/10ths
of the UK’s terrestrial TV transmission networks and, in the three years to
June 2016, paid around £750 million in interest to its controlling
shareholders, payments financed by borrowing.It is now £3 billion in debt. And that’s just one company.

Household debt did
not cause the 2007-8 Global Financial Crisis

What household debt did was light the touch-paper. The
nationwide implosion of the housing market in America after interest rates were
raised signalled the demise of all those mortgage backed securities and
collateralized debt obligations but the reason it proved so devastating for the
US economy and spread the crisis around the world was because of the fatal
combination of household debt with gargantuan financial sector and corporate
debt. The Global Financial Crisis was sparked in August 2007 (‘the day the
world changed’) when French bank BNP
Paribas froze its funds because of its exposure to the mortgage backed
securities of the US sub-prime market. The problem wasn’t defaulting French
mortgage-holders but the effects were being felt by a French bank. BNP was one
of three major French banks who were collectively overleveraged to the tune of 237%
of French GDP. That level of indebtedness caused the crisis to spread to
Europe as hugely indebted, and now effectively insolvent, European banks called
in the loans they had made to southern European governments.

But it’s equally possible that the fuse will be lit from
another sector of the economy entirely – massively overleveraged corporations
being unable to repay their creditors when interest rates rise, for instance. In
that case, households will simply be spectators to the unfolding events.

All the focus is on
personal debt because it represents a morality play

In Debt: The First
5,000 Years David Graeber points out that in Sanskrit, Aramaic and Hebrew
‘debt’, ‘guilt’ and ‘sin’ are all the same word. In modern German, the word for
‘debt’ – schuld – also means guilt.
“If history shows anything,” Graeber writes, “it is that there’s no better way
to justify relations founded on violence, to make such relations seem moral,
than by reframing them in the language of debt – above all because it
immediately makes it seem that it’s the victim who’s doing something wrong.”

The existence of enormous level of personal debt in advanced
capitalist countries is a sure sign that the individual freedom these societies
claim to uphold is skin deep. In reality, they are founded relations of
coercion and control. To be in debt is to have someone’s boot on your neck. In
the UK, high rates of personal debt are intimately related to the fact that
real wages are 10 per cent lower than a decade ago. Rising personal debt is
also strongly correlated to mental
health problems like depression and anxiety.

From another perspective, personal debt is the symbol of our
fatal addiction to consumerism, the consequence of an all-embracing need to
maintain a modern lifestyle, decorated with the latest products, no matter what
the cost to ourselves or the environment. Either way, personal debt
unmistakably says something about the
current state of society – what drives it and who is in control.

Corporate and financial sector debt, by contrast, is not
only opaque, it is frightening neutral. Debt has simply become the way of doing
business over the last 30 years. Debtors are frequently also creditors and
companies may simultaneously indebt themselves and hoard cash. Indeed, increasing ‘leverage’ (to use the technical
term) or loading debt onto captive companies (as in the Arqiva case) is often
the primary means by which profits are made. No sense of shame or ‘doing
something wrong’ attaches to it.

The question that should arise is why the corporate sector –
financial and otherwise – has become so addicted to debt? Why is old-fashioned
investment in new products or new technologies comparatively
shunned?

It is possible to
reduce personal debt but corporate debt is far more of an intractable problem

Theoretically it
is possible to cut personal debt to more manageable and less dangerous
levels.Ending austerity, strengthening
trade unions, instituting rent controls and directing efforts to raising the
level of real wages should see the rates of payday loan and credit card debt
diminish. I say theoretically because, interestingly, some of the
highest quantities of personal debt, as a proportion of GDP, are in
Scandinavian countries – nations that have impressive rates of trade union
membership, collective bargaining and high personal incomes. However, those in
debt in Nordic countries tend to be higher earners. In the US and UK, by
contrast, personal debt often afflicts people much lower down the income scale
– people who are much more likely to default given a slight change in the
economic winds.

Corporate debt is a different matter entirely. The massive
government bail outs of 2008 only succeeded in transferring debt from the
financial sector to the state and, even then, only denting marginally the
indebtedness of the banks. Corporations, whose debt had risen markedly over the
previous twenty years, merely took advantage of the lower interest rate
environment, to become even more indebted.

The writer and broadcaster Paul Mason says governments have
to do something ‘clear and progressive about debts’. He advocates a policy of
‘financial repression’ – that is stimulating inflation and holding interest
rates below the rate of inflation for 10 or 15 years as a way of writing off
debt. But we can see the problems that a mild rise in the rate of inflation to
the historically low level of 3% is currently causing people in the UK, with
wages unable to catch up. Deliberately stoking inflation for a decade or more
would surely precipitate the household debt defaults that so many people are
warning about – inflation would erode the total amount of people’s debt but
interest payments would still need to be met as real incomes plummeted. And if
interest rates are below inflation – as they are now – the incentive for
corporations to take on more debt is still there.

It is difficult to imagine how this system can gradually and
progressively resolve its problems without provoking the economic collapse that
everyone is so desperate to avoid.

Addendum

It's probably worth re-emphasising that when I speak about corporate debt, I'm not referring to the borrowing a company naturally needs to do to keep going and expand its operations. See - https://www.touchfinancial.co.uk/knowledge-centre/blog/4-reasons-why-successful-businesses-borrow-money

What's happening now is massive borrowing to either appear successful (share buy backs) or invest in debt to make more money. They're nothing to do with how capitalism is meant to function in the textbooks.

Tuesday, 1 August 2017

Harry Shutt is a freelance economist (he has carried out
more than 100 assignments for the World Bank, the United Nations Development
Programme and the European Commission) and the author of Beyond the Profits System (2010), The Decline of Capitalism (2005), which
predicted ‘an unavoidable financial crisis … on a scale far greater than any
previous one’ and The Trouble with
Capitalism (1998). Unusually for his profession, he is no cheerleader for
capitalism, rather asserting that the profit maximising corporate system is a
relic from the past whose continuance is doing immense harm to public welfare.
In this interview he reflects on Jeremy Corbyn, the real purpose of
Quantitative Easing, why economic recovery under the present system is
impossible, the necessity of a basic income and what future economic
enterprises might look like in an era of the rapidly diminishing value of
capital.

As unlikely as it
looked a few months ago, a Jeremy Corbyn-led Labour government now seems a
distinct possibility in the not too distant future. What’s your opinion of
Corbyn and Labour’s social democratic programme and where do Labour’s blind
spots lie?

From a Left
perspective Corbyn’s election to the Labour leadership was obviously a step in
the right direction, as also was his relative success in this year's general
election, based on a relatively radical manifesto and a strong campaign.
However, the election manifesto, which was quite widely praised, has some
serious drawbacks in my opinion. One of them was on the question of social
welfare, where they didn’t promise to reverse the cuts, which was pretty
extraordinary. And they didn’t come out with any alternative to the Tory
strategy. In that regard, there’s been a further report on the impact of
Universal Credit – it’s from the Citizens Advice Bureau and they’ve
called for it to be suspended. Labour ought to be calling for this. But
they simply haven’t got any other ideas. Even theoretically, Universal Credit
is a complete disaster and could never work in practice.

More fundamentally,
there is no mention in the manifesto of the problem of the massive national
debt – which has doubled since 2010 despite the desperate efforts of the
present government to contain it – other than a commitment to bring it down by
the end of this parliament (2022). Yet there is no indication of how this is to
be done, nor any mention of the macro-economic constraints to action or of the
very real threat of renewed financial crisis.

Your position differs
from many left-wing economists in that you say that not only has recovery not
happened since the crash of 2008, but, in the circumstances of enormous and
growing debt (financial, corporate and personal) and ultra-low interest rates,
recovery is simply not possible. Hence investors and entrepreneurs are forced
into ‘fictitious’ areas of activity – financial speculation – in order to make
a profit. But why exactly does a combination of an enormous debt overhang and
near zero interest rates preclude any genuine economic recovery?

As noted by at
least one other economist (Steve Keen), most economists simply do not
understand finance. If they did they would realise that the prevailing low
interest rates are the result of massive market manipulation officially
orchestrated by the US and other leading world economies. Likewise they would
recognise that the main purpose of Quantitative Easing is not to stimulate
economic activity but to buy up public debt and other financial securities at
prices far higher than their true market worth, thereby holding market interest
rates far below what they would be if they were to reflect the true value of
financial securities. In other words the current record levels of stock market
prices and unprecedented low interest rates are the result of a gigantic
state-sponsored fraud (probably the biggest in history). As such it must be
recognised that this QE-based fraud is unsustainable and is bound to end in a
monumental financial crash, with dire consequences for the entire world. What
is most astonishing to me is that other economists (particularly on the Left)
are unwilling or unable to recognise this.

Some left wingers
regard low interest rates as an opportunity for the government because they
mean it is able to borrow money cheaply and, for instance, build social housing
or install ultra-fast broadband and free public wi-fi. I
know you regard such thinking with disdain. What are your reasons?

Because of the existing or prospective
insolvency of most of the borrowers the only institutions likely to lend at
such low rates are ones associated with the government itself. So those who use
this argument are simply asking for the government to borrow from itself – or print
money by any other name.

The three things
you mention are all desirable. But why should we borrow even more to pay for
them when a) we are already in debt up to the eyeballs and b) the private
corporate sector has such huge excess reserves of capital (‘surplus value’)?
The LP manifesto was extremely timid in proposing higher taxes on corporate
profits; note also that in 2010 the Lib Dems proposed reversing some of the
generous concessions on Capital Gains Tax (CGT) given the City by the New
Labour government (of course dropped when they entered the Coalition), but the
LP manifesto makes only one very vague reference to reversing CGT
give-aways. The general point
is that there is no substitute for a huge redistribution of income and assets,
whether before or after (or perhaps during?) the coming financial collapse.

You’ve written that
‘there is no painless way of achieving a transition' to a new economic model.
But people are understandably frightened of what a mammoth economic crash would
lead to. It might usher in Fascism, war-lordism or even nuclear war. Is there
any way of moving to a more rational economic system without the roof caving in
so to speak?

No, the point of no
return was probably passed in the 1970s.

You’re a strong
advocate of a Universal Basic Income. But unlike many basic income proponents,
who imagine it as kind of fall-back to enable people to navigate the ‘gig
economy’, you’re adamant that UBI should be ‘the
primary mechanism of income distribution in the modern economy’. If basic
income will largely replace income from work for people does it therefore need
to be set at a generous level – much higher than just subsistence?

Not necessarily.
People will still have the opportunity to engage in paid employment /
self-employment to supplement their basic income stipend. But the UBI must be
sufficient to permit people to engage in non-remunerative activities without
financial hardship (bear in mind they will also benefit from the NHS and other
publicly financed universal services).

Your last book was
subtitled, ‘Possibilities for a Post-Capitalist Era’. Under a post-capitalist
economic system, if enterprises no longer maximise profit and people don’t
receive much of an income from paid employment (they get most of their living
costs from tax-funded UBI), how will universal services like the NHS and
education be paid for? Won’t tax revenue dwindle to a virtual trickle?

The pattern of
employment, value added, income distribution, pricing, taxation etc under a
post-capitalist economy remains to be determined as the system evolves. But
consider that (e.g.) if it costs little or nothing to produce things (as in the
“Zero marginal cost society” – ZMCS) then people won't need much income to
procure them. The likely knock-on effects of this on the cost of public
services are obvious.

Adam Smith is
commonly thought of as the father of market economics. But he was against the
corporate form (he thought that ownership and management should not be
separated) and advocated small-scale enterprises. Similarly, you regard
modern-day corporations as huge vested interests working to the detriment of
public welfare. In any case, you believe that the era of the mega-corporation –
enterprises that require massive capital investment and employ thousands of
people – is coming to an end. So, in future, what will economic enterprises
look like?

Again it's hard to
foresee. If capital is no longer scarce and its value correspondingly minimal
there will be little profit in trying to accumulate it in large quantities.
Likewise rapid technological change and the increasing difficulty of
restricting access to it will make it hard to capitalise on “intellectual
property” as mega-corporations currently do, especially with the advent of the
ZMCS. In this scenario I envisage enterprises (whether community or privately
owned) as mainly small-scale serving local economies. Note that Shell and other
oil companies are already preparing for life after petroleum, though most are
not anticipating the equally certain devaluation of most other activities of
high capital intensity.

Friday, 14 July 2017

“The bourgeoisie cannot exist without constantly
revolutionizing the instruments of production,” Karl Marx and Friedrich Engels
declared in The Communist Manifesto.
To Marx, capitalism was oppressive, immiserating and dehumanizing but, in the
final analysis, progressive because the technological leaps it entailed paved
the way for a rational, socialist society.

Nearly a hundred years later another economist, Joseph
Schumpeter, made a very similar point, but this time from a pro-capitalist
perspective. He referred to the “gale of creative destruction … that
incessantly revolutionizes the economic structure from within, incessantly
destroying the old one and incessantly creating a new one”.

The sociologist Randall Collins, whose essay on the
cognitively astute robots that will progressively decimate middle class
employment I reviewed in part
one, relies on the same intuition. Capitalist competition dictates that the
replacement of human labour with machines will inexorably go on for the next
20, 100 or theoretically 1,000 years, he claims, unless something extrinsic to
the system calls time on capitalist competition.

However, capitalist competition isn’t proving as
revolutionary as it’s supposed to be. Were the digital/robot revolution to be
merrily scything through the analogue economy, this would show up in soaring
productivity figures, which measure output per worker. In reality, productivity
in the advanced capitalist countries has rarely been lower. It currents stands
at 0.3%, down from the 1% of the pre-crisis years. And nothing like the 5%
achieved in the 1960s and early ‘70s. In Britain, productivity fell by 0.5% in
the first three months of 2017. And the productivity enigma is not limited to
advanced economies – regions like Latin America show similar inertia. The gale
of creative destruction has turned into an oppressive stillness.

Equally, unemployment shows scant signs of the robot
revolution. If robots were stealing all the jobs, thousands of people would find
themselves surplus to requirements. The official unemployment rate is 4.8% in
the UK and 4.7% in the US. Assuredly, these figures need to be read in the
light of the millions who have given up looking for work or are economically
inactive, but they do not appear to mask steadily rising structural unemployment
caused by technological displacement.

And the jobs being ‘created’ are not ones entailing the
supervision of machines; they are menial. The number of hand car washes in
Britain now stands at 20,000 while their mechanised equivalent, the rollover
cash wash, has halved in number in ten years. In the words of one commentator,
this is
“a kind of reverse industrialisation”.

Collins himself notes that the “biggest area of job growth
in rich countries has been low-skilled service jobs, where it is cheaper to
hire human labour than to automate.” In the US, he says, one of the most
impressive employment growth areas is (as of 2013 when he was writing) tattoo
parlours.

This is not to claim that new technologies are not being
conceived or realised. Most people, by now, have heard of 3-D printing,
self-driving cars and nano-technology. But they are not being utilised in the
economy. This is not a new development, though perhaps it is new for
capitalism. The steam engine was invented during the Roman Empire but was not
commercially exploited until the 18th century.

David Graeber attributes part of the reason for
technological stagnation to the corporate form. In Marx’s London, says
Graeber, scientific and technological innovation was the order of the day
because individual capitalists, rather than conglomerates, dominated. But in
the 20th century, corporations gradually extended their iron grip
and creativity declined.

There is something to be said for this. The point of a
corporation is not to encourage competition but stamp it out – to achieve monopoly
and restrict entry to the market to other firms. Once market dominance has been
achieved, you then aim to maximise take-up of your products (two or three of
the same gadget for everyone) and to restrict labour costs (by moving your
production to China for example). But technological innovation brought by a
rival company breathing down your neck is less desirable.

However, I don’t think this tells the whole story. The
really glaring declines in productivity have occurred after the 2008 financial
crisis. The official story is that government stepped to make sure credit
continued to flow through the system and to set the private economy back on the
virtuous path of self-regulation. But in reality what emerged was the
simulacrum of a competitive system, and one particularly ill-suited to
technological innovation. The priority was to preserve the system, and that overriding aim sacrificed what
technological dynamism there was.

It’s undisputed that what characterised the world economic
system before 2008 was overwhelming debt – debt miring banks, corporations and
subsequently governments, debt asphyxiating consumers as wages failed to grow.
But far from falling after the crisis, debt has continued to mount. In 2015 it
was revealed that global debt had risen by over 40% since 2008, climbing to $57
trillion. Ultra-low interest rates throughout the world have made that debt
manageable (by minimising interest payments) even while it continues to mount.

But this ‘preservationism’
has facilitated the after-life of a growing number of ‘zombie’ companies –
firms so much in debt that their income only covers the interest payments they
have to make. According to the OECD,
across nine European economies (including the UK), between 5 and 20% of the
total sum of private capital is sunk in zombie companies. It is estimated that
there are between 108,000 and 160,000
such undead companies in the UK. And there are presumably many more near
zombies. It no accident that genuine technological innovation is the preserve
of a few mega corporations, such as Apple, who are awash with cash. Most
companies don’t want to risk investment in untried technology.

This might explain the growth of menial, low paid, temporary
work rather than robotic technology. Such work guarantees profit but requires
minimal capital investment in new equipment. According to Adair Turner, the
former head of the UK’s Low Pay Commission, “there is something about
the economy which – left to itself – will proliferate very, very low paid
jobs.”But, of
course, the economy has not been ‘left to itself’ – its financial system has
been subject to a multi-trillion dollar bail-out and central banks across the
world are still in the process of ‘tapering down’ a Quantitative Easing
programme that has created $12.3 trillion out of thin air.

This economic settlement also indicates that the scenario
painted by Randall Collins – one where capitalist competition ordains the rapid
robotization of the economy, throwing 50 or 70% of people out of work by mid-century
– will take much longer to come to pass, if it does at all. A new and deeper
financial crisis will almost certainly get their first.

However, there is, at root, something strange about dreading
technological progress – desultory or transformative. Collins’ nightmarish
near-future – where a tiny elite owns all the automated businesses and computer
equipment and the vast majority of people fight over the scant number of jobs
serving them – is peculiar to a very particular kind of social structure. One
in which a person’s livelihood is dependent on whether they can make themselves
useful to the ‘productive apparatus’. In these circumstances, being displaced
by a machine is clearly very threatening.

But automation loses its menace if people’s income is
divorced from work; if the income they receive to live on has nothing to do
with their ability to sell themselves to an employer, or the capacity of a
machine to perform a task more efficiently than a human can. Once this
practical and conceptual breakthrough has been made, far from being something
to be dreaded, technology acquires a very different complexion. It becomes
something to be welcomed.

The thinker who most embodied this leap in understanding was
Murray Bookchin. Back in 1965 (its five decades old lineage revealing in
itself) he wrote an essay entitled Toward a Liberatory Technology that belied contemporary
attitudes of ‘deep pessimism’ and fatalism towards the effects of technology. “After
thousands of years of tortuous development,” Bookchin wrote, “the countries of
the Western world (and potentially all countries) are confronted by the
possibility of a materially abundant, almost workless era in which most of the
means of life can be provided by machines.”

The real issue to Bookchin was not whether this technically
transformed economy could eliminate repetitive and thankless toil, “but whether
it can help to humanize society”.
Technology, he claimed, did not have to enslave humanity or result in legions
of passive automatons mesmerized by gadgets. It could just easily facilitate a
revival of craftsmanship, producing products that people can personalise
themselves or freeing them to pursue ‘unproductive’ activities.

But the primary liberatory potential of technology lay in
the fact that it could give people the free time and energy to manage society
themselves. Past revolutions, such as the French or the Russian,
had shown tantalising glimpses of this possibility. The Parisian sections of
1789 or the Petrograd soviets (councils) of 1917 were democratic assemblies
which everyone could attend and participate in the hitherto privileged act of
‘policy making’. However, the brute fact that these societies were mired in conditions
of material scarcity meant, said Bookchin, that the mass of people had to
return to the role of mute wage slaves reproducing the means of subsistence,
while “the reins of power fell into the hands of political ‘professionals’”.

Future society – and specifically the robotized society
predicted by Collins – has no such restraints. It is only the outcome of a
perverse social structure that, in a material environment where robots and
computers carry out the vast majority of work, people fight among themselves
for the right to serve the elite. Nor is it inevitable that, as Collins
predicts, that post-capitalist society oscillates between the bureaucratic
oppression of central planning and market capitalism. Fully automated luxury
communism can not only facilitate a self-managed society but also satisfy
myriad wants far better than the Stalinist planned economies of the post-war
years. “From the moment toil is reduced to the barest possible minimum or
disappears entirely,” said Bookchin, “the problems of survival pass into the
problems of life, and technology itself passes from being the servant of man’s
immediate needs to being the partner of his (sic) creativity.”

I think three things are becoming increasingly clear: (i)
Automation determined by capitalist competition will magnify current
inequalities of wealth and power, leading to a dystopian future (ii) Far from
revolutionizing the ‘productive forces’, the corporate, debt-riddled, state-reliant
economy that has emerged from the 2008 global financial crisisis proving conspicuously bad at instituting
technological innovation, preferring old-fashioned exploitation of human labour, and
(iii) A post-capitalist society can choose which technologies to expedite,
without any concern about the consequences of throwing people out of work. It
can also facilitate enduring democratic self-management for the first time in
history. Given (i) and (ii) are not remotely desirable and will likely
precipitate huge conflict and war, getting to (iii), however difficult, is the
only rational course of action.

About Me

Capitalism is not beautiful, said John Maynard Keynes. It is not intelligent, it is not virtuous and it not just. “But when we wonder what to put in its place, we are extremely perplexed.”
This blog is about the ideologies that mask the ugliness and injustice beneath the surface. And how our perplexity might be diminished.
You can contact me at idealogically@gmail.com